The US is reportedly considering regulating "speculative" trading in the oil and gas markets, according to the New York Times. This brings to mind recent discussions on onions and a very mysterious competitive ballroom dancer accused of Wall Street espionage.
The relevant quote from the NYT about the perceived need to regulate the oil futures market is here:
"Oil prices have swung wildly in the last year, hitting about $145 a barrel last summer, then plunging to $33 in December before rising to about $70.
Much of that gyration stemmed from chaos in the global financial system, as banks and much of Wall Street came perilously close to collapse last September and the global economy fell into the most severe recession in decades.
But a growing number of critics have blamed some of the extreme volatility on the role of purely financial investors -- those who are simply betting on the direction of energy prices, as opposed to those who actually use such products, like airlines."
While more transparency in the markets definitely seems like a great idea--and the Commodity Futures Trading Commission is hoping to make records of trades more accessible--I do wonder about discerning trader's intent and tying their hands in the markets. What if an airline decides to make money on their oil trades? The futures market trades such a small volume of paper barrels (in comparison to the full number of barrels of oil traded daily) that it functions more like an index, anyway. And what happens if Exxon, say, decides to use the futures market to hedge against currency changes? Arbitragers are another target, apparently, but we love them when they make prices lower, which they do whenever they transfer cheap oil to our hot market.